Millick v. Stevens

• Decision Date: 27 May 1927
• Docket Number: 4656
• Citation: 257 P. 30,44 Idaho 347
• Parties: JOHN C. MILLICK, Respondent, v. A. B. STEVENS, Sheriff of Bingham County, Idaho, Appellant
• Court: Idaho Supreme Court

257 P. 30

44 Idaho 347

JOHN C. MILLICK, Respondent, v. A. B. STEVENS, Sheriff of Bingham County, Idaho, Appellant

No. 4656

Supreme Court of Idaho

May 27, 1927

CHATTEL MORTGAGES - ENCUMBRANCER IN GOOD FAITH - BONA FIDE PURCHASER-SUPERIOR LIEN OF MORTGAGEE.

1. Generally the term "encumbrancer in good faith" means bona fide purchaser for value, and does not include one who has taken security for pre-existing debt.

2. Under C. S., sec. 5434, mortgagee of personal property under mortgage given to secure antecedent debt had lien superior to purchaser of such property, who had failed to remove it from owner's premises, since mortgagee, in view of secs. 5697, 5698, 5748, was encumbrancer both in good faith and for value, in accordance with distinction drawn by secs. 5424, 6375.

APPEAL from the District Court of the Sixth Judicial District, for Bingham County. Hon. Ralph W. Adair, Judge.

Action in replevin. Judgment for plaintiff. Reversed, with instruction to enter judgment for defendant.

Judgment reversed, with instruction. Costs to appellant. Petition for rehearing denied.

Whitcomb & Cowen, for Appellant.

"The sole inquiry in this case, is whether there has been an immediate delivery followed by actual and continued change of possession. No question of intent, bona fide or notice is relevant." (Harkness v. Smith, 3 Idaho 221, 28 P. 423.)

"Where the assignor retains the property under the same control and management, the assignment is void as against creditors." (Johnson v. Sage, 4 Idaho 758, 44 P. 641.)

"An alleged sale is conclusively presumed to be fraudulent and void as against creditors of and purchasers from the vendor." (Ahlstrom v. Tage, 31 Idaho 459, 174 P. 605.)

"A transfer without immediate delivery of possession is void not merely as to those who are creditors at the time of the attempted sale, but also as to the one who becomes a creditor during the time the property remains in the possession of the seller." (Rohrbough v. Johnson, 107 Cal. 144 40 P. 37; Brown v. O'Neal, 95 Cal. 262, 29 Am St. 111, 30 P. 538; Guthrie v. Carney, 19 Cal.App. 144, 124 P. 1045.)

John W Jones and Guy Stevens, for Respondent.

A general creditor of the vendor could not attack a transfer under this statute, and likewise, in the analogous case of failure to record a chattel mortgage, the recordation of the instrument being the equivalent of immediate delivery, a general creditor of the mortgagor could not attack the mortgage for want of record. (Williams v. Borgwardt, 119 Cal. 80, 51 P. 15; Garn v. Thorwaldson, 40 Cal.App. 62, 180 P. 9.) Such a transaction is good as against a general creditor. (Neustadter Bros. v. Doust, 13 Idaho 617, 92 P. 978.)

The great weight of authority is to the effect that a chattel mortgage given merely to secure a pre-existing debt does not constitute the mortgagee one in good faith under the statute. (People's Sav. Bank v. Bates, 120 U.S. 556, 7 S.Ct. 679, 30 L.Ed. 754; Hicks v. National Surety Co., 50 Wash. 16, 126 Am. St. 883, and cases cited, 96 P. 515; Union National Bank v. Oium, 3 N.D. 193, 44 Am. St. 533, 54 N.W. 1034; Belleville Pump & S. Works v. Samuelson, 16 Utah 234, 52 P. 282; Wails v. Farrington, 27 Okla. 754, 116 P. 428, 35 L. R. A., N. S., 1174; First Nat. Bank of Navasota v. Todd (Tex.), 231 S.W. 322; 11 C. J. 660, sec. 411; 41 C. J. 545, sec. 488.)

This court held in the recent case of the Anglo-American Mill Co. v. Community Mill Co., 41 Idaho 561, 240 P. 446, that the bank, having taken the mortgage to secure a past due indebtedness, is not in position of an innocent purchaser for value, "and is not entitled to protection against secret titles as an innocent mortgagee for value unless at the time some new or additional consideration passes to the mortgagor for the execution of the mortgage." (4 Words & Phrases, 3117, and cases cited.)

T. BAILEY LEE, J. Wm. E. Lee, C. J., and Budge, Givens and Taylor, JJ., concur.

OPINION

T. BAILEY LEE, J.

One Eugene C. Hale, being upon April 2, 1923, the owner of certain brick and tile piled on his premises, sold the same to plaintiff who removed a portion thereof. At the time of the sale, Hale was justly indebted to the Boise-Payette Lumber Company in the sum of $ 341.85, and on June 12, 1924, to secure his indebtedness, he mortgaged the company that portion of the brick and tile still remaining on his premises. Neither the company nor any of its officers had any notice or knowledge that the plaintiff claimed any interest in the property so mortgaged. Thereafter, the defendant sheriff took possession of the mortgaged property under foreclosure proceedings by affidavit and notice; and plaintiff brought, against him, an action in replevin in the probate court. From a judgment in plaintiff's favor, defendant appealed to the district court where plaintiff again prevailed; and defendant appealed to this court.

The only point in this case is the right of the lumber company to assert its mortgage lien against plaintiff. Under C. S., sec. 5434, such a transfer of personal property is conclusively presumed to be fraudulent and void against certain classes of persons, including the seller's creditors while he remains in possession, and encumbrancers in good faith subsequent to the transfer. To proceed as a general creditor, the company must have secured an interest in the property hostile to the plaintiff, as by attachment or execution. (Neustadter Bros. v. Doust, 13 Idaho 617, 92 P. 978.) This, it has not done; and whatever interest it has secured as against plaintiff must derive entirely from its chattel mortgage. It must prevail as an encumbrancer in good faith or not at all. That the mortgage was given to secure an antecedent debt is admitted.

It is urged by respondent that, since the lumber company's mortgage was taken to secure an antecedent debt, the company is not an encumbrancer in good faith, and cannot avail itself of the protection of the statute. The general rule sustained by the weight of authority is that the term, "encumbrancer in good faith," means a bona fide encumbrancer for value, and does not include one who has taken security for a pre-existing debt. But, it would seem that our legislature has intentionally drawn a distinction between encumbrancers and purchasers in good faith, and encumbrancers and purchasers for value. (C. S., secs. 6375 and 5424.)

And from the facts disclosed in Land v Hea, 20 Idaho 250, 118 P. 506, and Anglo-American Co. v. Community Mill Co., 41 Idaho 561, 569, 240 P. 446, it would also seem that this court has recognized a like distinction. In each of those cases, the good faith of the purchaser and mortgagee was not questioned, but, the consideration being that of an...